In which of the following cases will the agency problem between shareholders and managers be the

greatest?

A) The Johnson family owns 50% of the common stock of the company. The other 50% is owned
by 5 mutual funds.
B) 100% of the common stock is owned by the founder of the company who decided to retire and
hired a manager to run his business for him.
C) The common stock of the company is owned by many diverse shareholders, with no
shareholder owning more than 1% of the outstanding stock.
D) All top managers in the company own significant amounts of stock and stock options.

C